Community Health shares plunge on 2Q outlook

FRANKLIN, Tenn. (AP) -- Community Health Systems Inc.'s shares plunged in Thursday late trading after the hospital operator said that lower admissions are hurting profits and announced the broadening of a federal investigation into short-stay emergency room visits by Medicare patients.

Shares dropped 18 percent in after-hours trading.

Community Health, based in Franklin, Tenn., is one of the nation's largest publicly traded hospital companies in the United States. Through its subsidiaries, the company owns, leases or operates 135 hospitals in 29 states.

The company said that total admissions in its second quarter fell 5.1 percent. The drop was most significant in May and June. Community Health also said that is dealing with higher-than-expected bad debts and an unfavorable shift in payors. For hospitals, this often is a sign that it is taking on more uninsured patients who are not paying bills.

Community Health says these trends have hurt its operating revenue and it anticipates reporting its first significant earnings miss since 2006.

The company forecast operating revenue of $3.24 billion for the three months that ended June 30, roughly flat with the same period last year. Analysts polled by FactSet, on average, were anticipating total revenue of $3.37 billion.

Community Health expects that its income before taxes will fall sharply to $65 million for the period from $151.7 million last year. Its adjusted earnings before income, taxes, depreciation and amortization will likely fall to $414 million from $483 million.

The company's quarter ended June 30. It will report its full quarterly results on July 29.

Community Health also said Thursday that a Department of Justice investigation into Medicare short-stay admissions from emergency departments is expanding. The company said it has met with the government twice this year to review and discuss the investigation, potential theories and defenses, along with other details.

Community Health was subpoenaed in April 2011 in connection with the probe into possible improper claims submitted to Medicare and Medicaid, particularly concerning emergency department processes and procedures, including a third-party software system.

Community Health said Thursday that the government, shortly after a second meeting, is now seeking additional information in the case related to those conversations. While many of these documents are the same as those initially requested in April 2011, the request is being broadened to include additional locations and types of documents.

The government has also indicated an intention to interview two of the company's current employees, a division president and one senior vice president. Community Health said it will continue to cooperate with the investigation.

Shares of the company fell $8.55 to $38.76 after hours. Its stock had added 6 cents to close regular trading at $47.31.